Your Friend and Partner

Dubai inflation slows to 0.6 pct in 2010

Posted by cvbasheer on January 19, 2011

DUBAI – Dubai inflation slowed to 0.6 percent last year, from 4.0 percent in 2009, as ongoing weakness in the property sector weighed on consumer price growth in the debt-laden Gulf Arab emirate, data showed on Wednesday.

Inflation in Dubai, one of seven members of the United Arab Emirates federation, hovered below 1 percent for most of last year as debt woes of state-owned companies slowed the recovery of the region’s trade and business hub.

“Growth is weak, credit growth is slow, rents have fallen sharply – no one should be surprised that inflation is so low,” said Simon Williams, chief economist at HSBC Bank in Dubai.

Dubai inflation data beyond an oil-boom year of 2008, when price growth reached a record 10.8 percent, are not available. With banks heavily exposed to Dubai’s indebted state conglomerates, corporate lending is yet to pick up. As a result, Dubai’s economy is estimated by the IMF to have expanded by just 0.5 percent last year, after shrinking 0.9 percent in 2009.

The government of Dubai, known for ambitious construction projects such as the world’s tallest tower and man-made palm-shaped islands, is more optimistic, expecting gross domestic product growth of 2.3 percent for 2010.

Oil wealth-lacking Dubai, which had long been the main growth driver of the UAE, the world’s third largest oil exporter, has not released real GDP data for the past two years.

On Wednesday, data from Dubai Statistics Center showed that housing costs, which have the largest 44 percent weight in the basket, fell 1.3 percent in 2010 , after a 2.4 percent rise in the previous year.

Communication prices, which account for 6 percent of Dubai living costs, plunged by 10.6 percent year-on-year, after edging down by 0.2 percent in 2009.


Food costs, which pushed inflation up across the Gulf last year, saw only a 1.9 percent increase, while growth in transport prices accelerated to 6.6 percent in 2010 following hikes in heavily subsidised gasoline prices.

Consumer price growth in Dubai is expected to quicken this year as sentiment improved after the state conglomerate Dubai World sealed a $25 billion debt restructuring deal in September but the weak property sector is seen slowing momentum.

“Our expectation is that in 2011, the driver of inflation will be food prices that are on an uptrend globally and energy prices,” said Giyas Gokkent, chief economist at the National Bank of Abu Dhabi.

Still, inflation in Dubai, which accounts for 80 percent of the UAE’s non-oil trade, is not expected to reach 2009 levels this year with analysts predicting price growth in a range of 1-3 percent. The government forecasts inflation at below 4 percent.

The statistic office did not release monthly inflation for December. The UAE has yet to publish December data for the whole federation.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: